Equalization: Deal or No Deal? Does it Matter?

Equalization: Deal or No Deal? Does it Matter?

With the equalization debate in full swing and threats of legal action over broken promises AIMS hosted an enlightening policy briefing on the new equalization formula.

National equalization expert and former Ontario Chamber of Commerce Policy Advisor David MacKinnon echoed much of AIMS’ research in his insightful analysis. He pointed out that there are considerable inequalities in the program, but not the ones that are being vociferously denounced by some in Atlantic Canada. MacKinnon pointed out that Ontario, Canada’s most populous province, is the one left holding the bag while equalization receiving provinces remain stuck in a rut.

“Ontario is a jurisdiction trying to maintain our footing in a world where everything, including most key services, is now or soon will be open to international competition. Even while we face this environment, we are locked into a fiscal system which requires us, as I hope I’ve demonstrated, to support others to a much higher standard of public services than our own and to devote an impossibly large proportion of our resources to do so.

This status quo is not only unaffordable, it is counterproductive.

There is a great deal of evidence, much of it produced by the Atlantic Institute for Market Studies in Halifax that the subsidy system, especially equalization, has greatly damaged the economic development of Atlantic Canada, Manitoba and Quebec. It has impaired their growth by insulating some from change, by creating massive state bureaucracies, by chasing unsubsidized companies out of business because they must compete against those that are subsidized, by gravely damaging labor markets through regional bias in E.I. and by encouraging national wage rates in economies that have no hope of supporting them.”